Dailey v. Holiday Distributing Corp.

• Citation: 260 Iowa 859,151 N.W.2d 477
• Decision Date: 06 June 1967
• Docket Number: E-Z,No. 52534,52534
• Parties: Doyle DAILEY and Gunvald Sande, d/b/aWash Laundromat, Appellees, v. HOLIDAY DISTRIBUTING CORPORATION and Speed Queen, a Division of McGraw-Edison Company, Appellants.
• Court: United States State Supreme Court of Iowa

Page 477

151 N.W.2d 477

260 Iowa 859

Doyle DAILEY and Gunvald Sande, d/b/a E-Z Wash Laundromat, Appellees, v. HOLIDAY DISTRIBUTING CORPORATION and Speed Queen, a Division of McGraw-Edison Company, Appellants.

No. 52534.

Supreme Court of Iowa.

June 6, 1967.

George E. Wright and James A. Lorentzen, Des Moines, for Holiday Distributing Corp., appellant.

Malcolm D. Young, Omaha, Neb., and Leland C. White, Harlan, for Speed Queen, a Division of McGraw-Edison Company, appellant.

Winkel & Winkel, Algona, for appellees.

RAWLINGS, Justice.

Action at law by purchasers of dry cleaning machinery to recover damages for breach of warranties, express and implied, from manufacturer and dealer. From judgment for plaintiffs on trial to the court both defendants appeal. We reverse.

January 15, 1962, plaintiffs Doyle Dailey and Gunvald Sande, bought from defendant Holiday Distributing Corporation, for installation in Algona, a twin unit automatic dry cleaner with instruction sign and auxiliary exhaust fan, manufactured by defendant Speed Queen, a Division of McGraw-Edison Company. Total cost was $7,506.46.

An unqualified purchase order appears on the face of a printed form, apparently prepared by defendant Holiday. It contains no reference to special conditions printed on the reverse side relating to warranties, defects, verbal understandings and other miscellaneous matters.

About April 7, 1962, installation of the machinery by defendant Holiday was completed.

Within two days mechanical problems arose. First a motor burned out. Then the doors periodically locked shut, making it impossible for customers to use the machine. The motor was replaced. However door troubles continued.

In an effort to correct this problem plaintiffs, at the suggestion of Holiday, installed an additional exhaust fan in the north wall behind the dry cleaner. This did not serve the desired purpose.

In June an employee of defendant Speed Queen visited plaintiffs' plant, and after working on the equipment advised plaintiffs the installation of grills or louvers in the south wall was necessary to permit circulation of more air. This too was done but the doors still locked.

Other mechanical difficulties developed from time to time. For example the solvent pump leaked, springs broke, the solution would not drain, valves did not function, wiring had to be replaced and starting coils burned out.

In accord with a suggestion by Holiday representatives these plaintiffs repeatedly called in a local refrigeration man for service work. Holiday's repair men also periodically but unsuccessfully attempted to effect necessary repairs.

According to plaintiffs' testimony one unit or the other was out of operation three-fourths of the time from installation to October 1963.

Plaintiffs also determined cost of operation the first five or six months was at least $2.00 for each load.

Holiday was repeatedly advised the machines were not functioning properly.

Testimony by defendants is to the effect the equipment was neither operated correctly nor properly maintained.

In November 1962, plaintiffs wrote Speed Queen reporting trouble with the machinery.

December 1, 1962, plaintiff Sande communicated with Holiday stating in substance the dry cleaner had never worked properly, and as a result he and Dailey wanted to be reimbursed for their investment and expenses.

Then April 29, 1963, an attorney for plaintiffs, by letter, advised Holiday the implied and express warranties covering the machine had been breached, with a demand for return of the purchase price and reimbursement for expenses.

In October 1963, plaintiffs abandoned use of the machine.

I. Plaintiffs commenced their original action against Holiday June 17, 1963. They then alleged rescission foundationed upon breach of warranty.

Later an amended and substituted petition was filed based on breach of express and implied warranties with demand for damages. Speed Queen was then brought in as an additional defendant. Subsequently plaintiffs amended, again claiming rescission. May 20, 1965, this amendment was withdrawn. Trial commenced the same day on plaintiffs' damage action against both defendants for breach of warranties.

Defendant Holiday asserts error in permitting the last amendment by plaintiffs.

A trial court has broad discretion in permitting or denying amendments and unless the discretion is abused we will not interfere.

And to allow is the rule, not the exception. See Claeys v. Moldenschardt, Iowa, 148 N.W.2d 479, 483; Durant Elevator Co. v. S. J. Hoffman & Sons, Iowa, 145 N.W.2d 25, 26--27; and Webber v. E. K. Larimer Hardware Co., 234 Iowa 1381, 1389, 15 N.W.2d 286.

However, an amendment should not be permitted under rule 88, R.C.P., if it materially changes the issues involved.

In Akkerman v. Gersema, Iowa, 149 N.W.2d 856, 860, we found no abuse of discretion in permitting a party first seeking relief by declaratory judgment action to amend and ask reformation of contract. See also Cook, Iowa Rules of Civil Procedure, Vol. 1, page 551.

Recission is the unmaking of a contract.

Breach of warranty means the infraction of an express or implied agreement as to the title, quality, content or condition of a thing sold or bailed. See Rasmus v. A. O. Smith Corporation, D.C. 158 F.Supp., 70, 78--80; Morris Plan Leasing Co. v. Bingham Feed and Grain Co., Iowa, 143 N.W.2d 404, 414; United States Hoffman Machinery Corp. v. Carlson, 253 Iowa 304, 309, 111 N.W.2d 271; and Broer v. Dr. Fenton's Vigortone Co., 231 Iowa 1276, 1278, 4 N.W.2d 416.

Breach of warranty May be the foundation upon which rescission is based but in itself does not constitute rescission. United States Hoffman Machinery Corp. v. Carlson, supra, loc. cit., 253 Iowa 307, 111 N.W.2d 271.

While thus distinguishable, both still stand in the field of contracts. Rasmus v. A. O. Smith Corp., D.C., 158 F.Supp. 70, 78--79, and Prosser on Torts, Hornbook Series, Third Ed., pages 644 and 651.

By the May 20th amendment plaintiffs in effect abandoned the rescission theory and reverted to their earlier action based on alleged breach of warranty.

Under these circumstances we find no basis upon which to hold abuse of discretion on the part of the trial court in permitting plaintiffs to fall back upon their May 20th amendment.

II. As stated in Morris Plan Leasing Co. v. Bingham Feed and Grain Co., Iowa, 143 N.W.2d 404, 410: 'This case is not reviewable de novo here but only on errors assigned. The evidence will be viewed in the light most favorable to plaintiff--this is also the light most favorable to the trial court's judgment. Its findings of fact have the effect of a special verdict and are binding upon us if supported by substantial evidence. Citation of authority is unnecessary. Rule 344(f)1, Rules of Civil Procedure. Our question is whether the trial court's findings are supported by substantial evidence, and we will not weigh the evidence or the credibility of the witnesses. (Authorities cited). The rule does not exclude inquiry into the question whether, conceding the truth a finding of fact, a conclusion of law drawn therefrom by the trial court is correct, nor does it apply if in arriving at a finding the court erred in its ruling on evidence or in other respects upon questions of law which materially affect the decision. (Authorities cited).'

III. Both defendants assert error by the trial court in finding there was a breach of express warranty.

For convenience we shall first consider the position taken by Speed Queen on this issue.

By way of exclusion where is no evidence disclosing any express warranty was ever advanced, made or given to plaintiffs by defendant manufacturer.

In fact the only possible basis upon which any claim to the contrary could stand is that Holiday acted as agent for Speed Queen.

Plaintiffs' pleading alleges, in part, Holiday acted as agent jobber and broker for Speed Queen. This blanket conclusion is admitted by Holiday's answer. However that alone is not binding on defendant Speed Queen which denied any such relationship.

'Agency is a fiduciary relation which results from the manifestation of consent by one person, the principal, that another, the agent, shall act on the former's behalf and subject to his control, and consent by the other so to act.' Reed v. Bunger, 255 Iowa 322, 328, 122 N.W.2d 290, 294.

An agent may testify as to his authority. Johnson v. Aeroil Products Co., Inc., 255 Iowa 931, 936, 124 N.W.2d 425.

But his extra judicial statements to a third person are not admissible, over objection, to prove a principal and agent relationship between himself and another. Robinson v. Home Fire & Marine Ins. Co., 244 Iowa 1084, 1089, 59 N.W.2d 776; Schroeder v. Cedar Rapids Lodge, 242 Iowa 1297, 1301, 49 N.W.2d 880; Friedman v. Forest City, 239 Iowa 112, 126, 30 N.W.2d 752; McDonald v. Dodge, 231 Iowa 325, 327--328, 1 N.W.2d 280; and 3 C.J.S. Agency § 322c, page 276.

Incidentally, Restatement, Second, Agency, section 14J. provides: 'One who receives goods from another for resale to a third person is not thereby the other's agent in the transaction: whether he is an agent for this purpose or is himself a buyer depends upon whether the parties agree that his duty is to act primarily for the benefit of the one delivering the goods to him or is to act primarily for his own benefit.'

Plaintiffs having made the affirmative assertion of an agency relationship between these two defendants, had the burden of proving it by a preponderance of the evidence. Rule 344(f)(5)(6), R.C.P.; Reed v. Bunger, supra, loc. cit., 255 Iowa 329, 122 N.W.2d 290; and McDonald v. Dodge, supra, loc. cit., 231 Iowa 328, 1 N.W.2d 280. This they failed to do.

We have no alternative but to conclude the trial court erred in finding defendant Speed Queen ever made or gave any express warranty upon which plaintiffs may rely.

IV. The next question presented is whether Holiday can be held responsible by reason of...